Hooks; GRI 1; CFTA; originating goods; General Note 3(c)(vii)(B)(2); General Note 3(c)(vii)(R)(15)(aa); change in tariff classification

HQ 951927 September 15, 1992 CLA-2 CO:R:C:M 951927 KCC CATEGORY: Classification TARIFF NO.: 8302.50.00 Ms. Deborah J. Clune PBB USA Inc. 434 Delaware Avenue Buffalo, New York 14202 RE: Hooks; GRI 1; CFTA; originating goods; General Note 3(c)(vii)(B)(2); General Note 3(c)(vii)(R)(15)(aa); change in tariff classification Dear Ms. Clune: This is in response to your letter dated May 19, 1992, to Customs in Buffalo, New York, on behalf of the Nystrom Group, regarding the tariff classification under the Harmonized Tariff Schedule of the United States ("HTSUS"), and eligibility under the United States-Canada Free Trade Agreement ("CFTA"), of hooks from Canada. Samples of the hooks were submitted for examination. FACTS: The hooks under consideration are formed from steel and drilled with holes in Sweden. The hooks are then entered into Canada where Nystrom paints the hooks, and packages them with Canadian manufactured screws. The packaged hooks are then imported into the U.S. You submitted a percentage breakdown of the selling price for export as follows: Swedish material 34.5% Freight & Duty 4.9% Canadian Material 9.4% Canadian Labor 6.2% Canadian Overhead 36.4% Profit 8.6% Selling Price for Export 100% ISSUE: I. What is the proper tariff classification of the hooks under the HTSUS? II. Are the hooks eligible for preferential tariff treatment under the United States-Canada Free Trade Agreement ("CFTA")? LAW AND ANALYSIS: I. Tariff Classification The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUS, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes...." The hooks are classified under subheading 8302.50.00, HTSUS, which provides for "Base metal mountings, fittings and similar articles suitable for furniture, doors, staircases, windows, blinds, coachwork, saddlery, trunks, chests, caskets or the like; base metal, hat racks, hat-pegs, brackets and similar fixtures; castors with mountings of base metal; automatic door closers of base metal; and base metal parts thereof...Hat-racks, hat pegs, brackets and similar fixtures, and parts thereof." This tariff provision is eligible for preferential tariff treatment under the CFTA. II. The United States-Canada Free Trade Agreement To be eligible for tariff preferences under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), HTSUS. There are two primary means in General Note 3(c)(vii)(B), HTSUS, by which articles imported into the U.S. may be "goods originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1), HTSUS. The second method is if the goods are "transformed in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(2), HTSUS. A product which is "wholly obtained or produced in the territory of Canada and/or the United States" is one which is grown, mined, harvested, born and raised in Canada and/or the United States, or otherwise intimately connected to the two countries and their land, air and sea territories and defined in General Note 3(c)(vii)(L), HTSUS. The hooks are formed and drilled in a third country, Sweden. Therefore, the hooks do not meet the definitions found within General Note 3(c)(vii)(L), HTSUS, and are not "wholly obtained or produced in the territory of Canada and/or the United States" under General Note 3(c)(vii)(B)(1), HTSUS. The second method to become an originating good for CFTA purposes is for an article made of foreign materials to be transformed in Canada and/or the United States in accordance with General Note 3(c)(vii)(B)(2), HTSUS. A transformation occurs when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUS. Pursuant to General Note 3(c)(vii)(R)(15)(aa), HTSUS, a transformation is evident for Chapter 83, HTSUS, when a change from one chapter to another occurs. In this instance, the unpainted hooks are classified under subheading 8302.50.00, HTSUS, when they enter Canada. Upon importation into the U.S., the same hooks, now painted and packaged with screws, remain classified under subheading 8302.50.00, HTSUS. No change in tariff classification occurs. The hooks are not transformed in Canada and, therefore, are not considered to be "goods originating in the territory or Canada." HOLDING: The hooks are properly classified under subheading 8302.50.00, HTSUS, which provides for "Base metal mountings, fittings and similar articles suitable for furniture, doors, staircases, windows, blinds, coachwork, saddlery, trunks, chests, caskets or the like; base metal, hat racks, hat-pegs, brackets and similar fixtures; castors with mountings of base metal; automatic door closers of base metal; and base metal parts thereof...Hat-racks, hat pegs, brackets and similar fixtures, and parts thereof." The hooks are not transformed in Canada so to affect a required change in tariff classification in accordance with General Notes 3(c)(vii)(B)(2) and 3(c)(vii)(R), HTSUS. Thus, the hooks are not "goods originating in the territory of Canada" for CFTA purposes in accordance with General Note 3(c)(vii)(B), HTSUS. Sincerely, John Durant, Director Commercial Rulings Division